'Walking Dead' creator sues AMC over profits

Sunday

Jan 5, 2014 at 6:00 AM

'The Walking Dead" creator Frank Darabont and his agent CAA have filed suit against AMC Networks, claiming that they are owed tens of millions of dollars for the runaway hit, one that the cabler claims is running a deficit.

The suit, filed on Tuesday in the Supreme Court of the State of New York, contends that AMC has been engaged in "the improper and abusive practice of 'self-dealing.'"

"One AMC affiliate produces 'The Walking Dead' and then licenses the show for an artificially low fee to another AMC affiliate that televises the show to the public," the suit states. "The sole goal of this sham transaction is to enhance profits of the parent company by minimizing the revenues that go into the 'pool' of funds for the show's profit participants."

The suit states that Darabont is entitled to profits based on the success of the show under a formula in which he receives a percentage from a 'pool' of modified adjusted gross receipts. CAA, which packaged the series, also is a profit participant, the suit states.

Their suit claims that the biggest source of gross receipts, the license fees, are being "manipulated" as AMC controls the entity producing the show and shows it on its AMC channel.

But rather than pay "fair market value," as Darabont's contract required, he and CAA contend that the AMC created a "license fee formula" that "guarantees that the series will remain grossly in deficit." The suit states that the formula "imputes" a license fee "millions of dollars lower" than what AMC would have to pay a non-affiliated studio like Lionsgate or Warner Bros. Darabont's suit also says that he "has not received and may never receive one dollar in profits for developing the series." The series, his attorneys contend, had a $49 million deficit as of September 2012.

Darabont was dismissed from the series in 2011.

AMC declined to comment.

Stu Segall Prods. also is named as a defendant, which Darabont and CAA claim was "simply used" as a signatory to the network's agreement with Darabont to comply with guild requirements.

Dale Kinsella, one of Darabont's representatives, said that the suit is distinctive in part because "the success of this particular series is somewhat unprecedented because it has obliterated the distinction between cable and network TV."